Published: September 12, 2005
The major averages posted
broad-based gains last week as volume began to return to the market.
Normally, after Labor Day, with summer vacations over, the big money
managers begin returning to the market. It appears that's happening
right on cue this year, as trading activity has started to pick up
notably in recent days.
Of course, the aftermath of
Hurricane Katrina continues to dominate the news. Our hearts go out to
the millions of residents along the Gulf Coast affected by this terrible
storm. However, in addition to the human toll, the storm has had some
important economic effects.
The most obvious impact has
been on the energy markets. Fortunately, workers have been quick to
restore power to some of the region's largest refineries since the
storm. While there are still two severely damaged refineries in the
region, the gasoline supply crunch that sent prices sky-high a week ago
has finally started to reverse. Falling gasoline prices are a boon for
the market; some had started to warn that average prices over $3.00
would have a major impact on consumer spending.
In addition, some are betting
that Katrina's impact and the long process of rebuilding will force the
Federal Reserve to temporarily halt its rate-hiking campaign. Rising
interest rates have been a big headwind for the market in recent months,
so this also contributed to the market's strength last week.
Of course, a number of nagging
concerns remain for this market, and these certainly haven't disappeared
in recent weeks. Although energy prices have cooled somewhat, they
remain very high. Meanwhile, the full extent of Katrina's damage in the
Gulf of Mexico is still unknown. Already, retailers have seen some
drop-off in sales, as high gasoline prices have kept consumers away from
their stores. By most accounts, this year's "Back to School"
shopping season was disappointing. And there are now valid concerns that
the retail weakness will extend into the Christmas holiday shopping
season as well.
The market has barely moved so
far this year, and is up just a few percent since January 1st. Although
the final months of the year are typically a strong period for the
markets, I believe these and other fundamental concerns will keep a
tight lid on any market rallies as we head into 2006.
Good investing!
-- Paul Tracy
Editor
StreetAuthority
Market Advisor
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Paul Tracy
founded StreetAuthority and became Editor in Chief in 2001. Prior to
that he spent several years as Managing Editor at a multi-million dollar
financial publishing firm with over 150,000 subscribers. In addition to
his role as managing editor and lead financial writer, he was also
responsible for equity research and managing a team of seasoned
professional financial writers, researchers and market commentators.
Paul's previous experience
includes a position at Robert W. Baird & Co.'s full-service
brokerage operations as well as economic research work on a Money and
Banking project funded by the National Bureau of Economic Research. He
has also spent time doing outside consulting and research for the
University of Virginia, has appeared as a guest expert on several
prominent financial radio shows, and has been a featured speaker at
various investment conferences across the U.S.
Paul graduated with a B.S.
in Finance and Management from the McIntire School of Commerce at the
University of Virginia.
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